Rediff.com« Back to articlePrint this article

Tech Mahindra gets cracking on Satyam

April 09, 2009 10:24 IST

Senior officials from UK-based telecom and broadband conglomerate, BT -- the largest shareholder in Tech Mahindra with nearly 31 per cent stake -- are understood to be in Mumbai to discuss the acquisition strategy for Satyam Computer Services. The team primarily comprises finance officials.

"This indicates the seriousness of Tech Mahindra's bid for Satyam," a source close to the development said. A Tech Mahindra spokesperson declined comment on the issue.

For Tech Mahindra, say analysts, acquiring Satyam will be a good diversification strategy. "It is way too dependent on one sector, telecom, and one client," said an analyst. Satyam will not only give it access to different business verticals but also key clients.

Officials at Tech Mahindra have been concerned over the client loss that Satyam has witnessed over the past few months. The biggest concern for them is the liabilities that Satyam will have to face due to the 13 US class-action suits, the unresolved Upaid case, as well as lack of clarity on client and employee details.

Larsen & Toubro and Tech Mahindra have been the two favourites among analysts for acquiring Satyam. However, raising funds to acquire Satyam remains a concern. Tech Mahindra had $110 million (around Rs 5.5 billion) of cash on December 31, 2008.

Recently, rating agency Fitch withdrew its rating for Tech Mahindra. The agency highlighted that any debt-led acquisition would act as a negative trigger for the company.

Meanwhile, the government-appointed Satyam board will meet informally on Thursday. Nasdaq-listed Cognizant Technology Solutions is understood to still be in the race and so is US-based private equity firm WL Ross & Co. The deadline for submitting financial bids is April 13. The winner is expected to be declared the same day.

BS Reporters in Mumbai
Source: source image